CHAPTER LXVII.

RECENT WALL STREET BOOMS.

THE RESISTLESS POWER BEHIND THE MARKET.—THE ADVENT OF GOVERNOR R. P.

FLOWER.—HOW STOCKS WERE BOOMED WITH A DASH.—A SUDDEN DEATH AVERTS A

BIG PANIC.—MR. MORGAN AS A RAILWAY REORGANIZER.—HOW BANNIGAN

UNLOADED HIS RUBBER.—MILLIONS WON ONLY TO BE LOST.

Wall Street, after the election of McKinley, enjoyed a boom such as it

has seldom known. Probably the most interesting feature about this boom

was that it was not in any sense spectacular. In that respect it is

unique. Prices of stocks went higher and the intrinsic value of most of

them was greater than ever before. The market had all the qualities that

normally would cause intense excitement and focus the attention of the

entire country on the Stock Exchange. Yet in spite of these conditions

the Street was in a normal state of mind, and it is doubtful if the

general mass of the people, who get their information from the

newspapers, were aware that there was even an ordinary boom in Wall

Street. This unusual condition was due, I believe, to the fact that the

boom we were enjoying was built on a foundation that reached clear to

the bowels of the earth. There was nothing unnatural or artificial about

it. Wall Street, instead of being the center, is simply one of the

centers that reflects the general prosperity throughout the country.

Farmers, merchants, mechanics, mill workers, and miners are all so

intent on keeping pace with the progress in their own pursuits that they

have no time to cast eyes our way. The same conditions that boom stocks

may boom everything else in the country at an equal rate, so that we are

in nowise deserving of special attention.

Another factor, too, had developed in the Street that prevented the

usual excitement and hurly-burly incident to a rising market. This was

the absence of a pronounced central figure. Usually a boom centers about

some one man who stands boldly out in the open, and whose hand is known

to be manipulating values. But then the manipulation was being carried

on by a method that was as quiet as it was novel and unusual. That the

market was being manipulated was apparent enough even to the most casual

observer. But the source of this manipulation was probably known to only

a few.

They knew that a new order of things had come, due to the most powerful

influence that had ever manifested itself in Wall Street. This influence

was very largely composed of the Standard Oil combination, who

introduced in their Wall Street operations the same quiet,

unostentatious, but resistless measures that they had always employed in

the conduct of their corporate affairs. The heretofore conspicuously big

operators were mere tyros beside the men who are running things for us

now.

At his best, Jay Gould was always compelled to face the chance of

failure. Commodore Vanderbilt, though he often had the Street in the

palm of his hand, was frequently driven into a corner where he had to do

battle for his life; and so it was with every great speculator, or

combination of speculators, until the men who control the Standard Oil

took hold. With them, manipulation has ceased to be speculation. Their

resources are so vast that they need only to concentrate on any given

property in order to do with it what they please; and that they have

thus concentrated on a considerable number of properties outside of the

stocks in which they are popularly supposed to be exclusively interested

is a fact well known to everyone who has opportunities of getting

beneath the surface. They are the greatest operators the world has ever

seen, and the beauty of their method is the quietness and lack of

ostentation with which they carry it on. There are no gallery plays,

there are no scare heads in the newspapers, there is no wild scramble or

excitement. With them the process is gradual, thorough, and steady, with

never a waver or break. How much money this group of men have made it is

impossible even to estimate. That it is a sum beside which the gain of

the most daring speculator of the past was a mere bagatelle is putting

the case mildly. And there is an utter absence of chance that is

terrible to contemplate. This combination controls Wall Street almost

absolutely. Many of the strongest financial institutions are at their

service in supplying accommodations when needed. With such power and

facilities it is easily conceivable that these men must make enormous

sums on either side of the market. So far, fortunately, their

manipulations have all been one way—upward; and in conjunction with the

general prosperity this has resulted in making large sums of money for

nearly everybody in the Street.

Here and there we have heard of losses, some of them fairly large, but

in comparison with the general money-making these are hardly to be taken

into consideration.

The last preceding boom that Wall Street had enjoyed was as different

from this as it is possible to imagine. It had all the elements which

this one had not. It centered about one man who stood out in the lime

light clear and distinct. It kept the Stock Exchange in a constant state

of ferment. It filled the newspapers with column upon column of

sensational stories. It made millions for an army of retainers, on

paper, and it kept the market jerking up and down for months.

Roswell P. Flower, ex-Governor of the State of New York, was the leader

of the boom, and a more picturesque figure had never been seen in Wall

Street, which is saying a great deal. Mr. Flower was an individual of a

very plain exterior. He often used language that was noticeable more for

its force, directness, and emphasis than it was for polish. He was

rarely seen without a huge quid of tobacco that almost filled the left

side of his mouth. Spittoons were an essential part of the furnishings

of his office. His clothing hung on his person not unlike meal sacks.

His hat was rarely brushed, and for days at a time, apparently, he

forgot to shave. Altogether he was the last person, in appearance, who

would be expected to lead in a district that is famous for its

well-groomed men. His education was certainly not collegiate. All these

factors the ordinary man would have judged to be handicaps, yet they

were Mr. Flower’s strongest aids. The lack of artificial polish gave

people confidence in his statements. His limited education enabled him

to think clearly along certain lines without being hampered by mental

digressions, which would probably have come with a higher mental

culture.

As the administrator and manager of the estate of his brother-in-law,

Henry Keep, he came into the Street about twenty-five years ago. He

controlled a large amount of funds, which by conservative direction he

increased very substantially. He scarcely ever figured in the

speculative field to any great extent until after he had completed his

term as Governor of New York State. When he returned to the Street from

Albany he naturally came with a considerable prestige. Ex-Governors of

the Empire State are not very plentiful in and about the Stock Exchange.

He also brought with him a large political following. In both of the

great parties in New York State there are many men of standing and

influence who like to take a flyer in Wall Street. Almost to a man they

associated themselves with Mr. Flower, who, during his term at the

capital, had made hosts of friends with Republicans and Democrats alike.

He also had close associations with most of the big capitalists.

After he had settled down to business, on leaving politics behind, Mr.

Flower picked out several stocks as his specialties. Under his

manipulation all these properties went up and soon began to show a big

advance, unusual strength, and great activity. The bears made frequent

assaults on his position and now and then pushed him toward the wall,

but he always fought his way to the front again, and came out master in

every encounter. When he had himself pretty well intrenched in the

specialties he was handling, he suddenly plunged into Brooklyn Rapid

Transit, and for months he kept things stirred up in a way that even

Wall Street has seldom seen. He picked up the stock commencing at 6 and

in an incredibly short time ran it up to over 138. Almost every

politician in the State made a fortune on paper. Mr. Flower was

immensely popular with the Wall Street news reporters, who helped his

boom along through the glowing accounts they wrote from day to day.

Under the impetus of the swirl in Rapid Transit, practically every

property in the Street went flying upward, until the end did not seem to

be in sight. The bears were beaten to a standstill every time they

showed their heads. The only result of their attacks was that Flower

stocks would jump up a notch higher. The ex-Governor preached

Americanism and confidence, until everybody believed that if a stock

were only grounded, and the property located in America, you could buy

it at any price and still be on the safe side.

That a terrible panic did not grow out of this boom was due only to one

fact: Mr. Flower’s sudden death. Had he lived thirty days longer the

bubble must have been pricked, and the result would have been

disastrous. Mr. Flower went to the country for a day’s rest, ate freely

of ham and radishes, and washed his frugal meal down with a copious

supply of ice water. He died, a few hours afterwards, of an attack of

acute indigestion. His death alone saved the Street.

The Rockefellers, the Vanderbilts, and his other wealthy friends rushed

into the market with millions and sustained values. They were in a

position to attribute the threatened reaction to his death, and pointed

out the absurdity of letting such an incident affect the value of

stocks. They discounted the break that must have come, in the natural

course of events, under the forcing process that was going on. Reasoning

such as this, spread broadcast through the papers, stopped the break.

Where the bottom would have fallen out entirely there was virtually but

a moderate break all along the line. The small speculators, operating on

moderate margins, were of course wiped out almost to a man; but most of

the big fellows were saved. It is probably the only instance on record

where the death of a big operator saved a general smash. Those hurt were

numerous politicians and small-fry operators who, instead of getting

away with snug fortunes in the shape of profits, lost everything.

An interesting incident of the Flower boom was the way it was

involuntarily helped along by young Joe Leiter. Leiter himself, although

he had gone to the wall some time previously, had indirectly brought

about certain conditions that served Mr. Flower’s purpose admirably.

These conditions were the general release of hundreds of millions of

dollars on mortgages on farm lands. When Leiter began to corner wheat it

was ruling down in the neighborhood of sixty cents a bushel. He lifted

it to considerably over a dollar before he went broke. This enabled

thousands of farmers to realize on their crops at the dollar figure and

above, which brought prosperity almost overnight to the wheat-growing

belt. With the money realized from their wheat they paid off their

mortgages to the extent of two or three hundred million dollars. These

mortgages were generally held in the East. This released that much

Eastern capital, causing a vast volume of money to seek investment. The

men controlling this money were overjoyed when Mr. Flower made an

opening for them through the Wall Street boom, and hence it was

comparatively easy, for a time, to push up values.

Mr. J. Pierpont Morgan, now a noted character in the Street, was trained

as a clerk in the one-time famous banking house of Duncan, Sherman & Co.

Later he made a connection with Anthony J. Drexel, probably the

wealthiest banker of his time in America. Out of this connection grew

the house of Drexel, Morgan & Co., with Mr. Morgan as the managing

partner in New York. When Mr. Drexel died, Mr. Morgan absorbed the

entire business, and a few years later, when his father died, he became

the head of the London house of J. S. Morgan & Co. as well.

This put him in a very prominent position. He soon thereafter

demonstrated his influence by reorganizing the bankrupt Richmond and

West Point Terminal Railway and Warehouse Company, changing its name to

the Southern Railway Company. A number of small roads were added to it,

many of which were in financial straits and practically all of which had

been badly managed. He combined them into one system under one head. Mr.

Morgan next turned his attention to the reorganization of the Reading

and the Erie roads, which were in a bad way. He soon produced order out

of chaos there, and that resulted in a boom in railroad stocks all along

the line. He had several sharp tussles, however, with some of the big

stockholders, who tried to stand out against him because they thought

his plans too drastic.

The people who followed Mr. Morgan’s lead in these transactions

generally made money.

A different sort of deal was engineered a few years before by Mr. S. V.

White, popularly known as Deacon White, because of his position as a

deacon in Plymouth Church. Mr. White is one of the oldest operators in

the Street, and one of its most striking figures. He has made half a

dozen great fortunes in speculation and lost them, but he is as

undaunted as ever, and in spite of the fact that he is now over seventy

years old he is still active daily in the market.

Probably one of the most unique stock deals ever carried out in the

Street resulted from the transaction of Joseph Bannigan when President

of the Rubber Trust. The history of this deal, which for a time resulted

in a great boom in industrials, has never been told, and is known to but

very few persons, most of whom, by the way, were its victims.

Bannigan was an uneducated Irishman. He began life in a New England

rubber factory and conscientiously worked his way up from a wage of

$1.50 a day to die worth $5,000,000. He was shrewd and bright and knew

the value of money. He saved to such good purpose that when the Rubber

Trust was formed he was at the head of one of the biggest factories in

the country, located in Providence. His knowledge of the trade was so

thorough that, despite the fact that he almost invariably used small

“i’s” in writing a letter, he was made president of the trust, his

holdings amounting to about 40,000 shares. When matters had been moving

along for some time, Bannigan made up his mind that the other men in the

trust, the big fellows, were not treating him right, and that the best

thing he could do was to get out. So he packed his stock certificates in

a gripsack, left Providence on the night boat, landed in New York bright

and early, had his breakfast, and then made a bee line for a

stockbroker’s office. He had assured himself in advance that this

stockbroker was to be relied upon, and so he told him frankly what he

intended to do.

“I want to sell out, bag and baggage,” he said. “I want to get rid of

every one of my 40,000 shares. Here they are; put them on the market and

sell them.” The stockbroker told him that that would never do. If he

wanted to realize full value for his holdings he would have to go about

it in a different way, for if he should throw his 40,000 shares into the

market it would knock the bottom out of prices, and he would get little

or nothing for his stock. Mr. Bannigan saw the point and asked what he

ought to do.

“Buy,” said the broker.

“But I don’t want to buy; I have got more now than I want.”

“That is all right; buy anyway; that will make a market for the stock,

and you can unload when the time comes.”

“How much must I buy?”

“Oh, about $250,000 worth.”

“But I have not got $250,000 in cash to go and buy rubber stock.”

“Well, you can borrow it; a man in your position, Mr. Bannigan, will

have no difficulty in borrowing $250,000.”

Much against his will the old man was finally persuaded to do as he was

told. About two weeks later the broker wrote to him that he must buy

some more—this time $200,000 worth. Mr. Bannigan used rather strong

language, but finally yielded as before. He borrowed $200,000 and turned

it over. With this additional capital to work on, the broker continued

to manipulate the market. The insiders soon discovered that some strong

party was buying, but they did not know who, Bannigan having carefully

kept himself in the background. His broker operated skillfully in the

stock, one day buying, the next selling, to keep the stock active. The

broker after a while began to borrow large amounts of the stock. This

convinced the insiders that there was a big short interest somewhere,

and they got together in order to squeeze the shorts. The inside holders

who controlled most of the stock combined to squeeze “the shorts” out.

In furtherance of this plan they put the price up to 61, and at about

that figure Bannigan’s stock was all unloaded. Bannigan now found

himself full of money, while the other fellows were filled up with his

stock. They never awakened to the fact that the president had sold out

on them until his shares were delivered against their purchases, as they

thought, of “short” stock. Rubber broke and did not stop tumbling until

it had gone from 61 to 16.

This deal had all the elements of a comedy-drama, and the playwright who

can do it justice will find material there which will make him an

everlasting fortune and reputation.

It is not often, however, that newcomers in the Street fare as well as

this in the end. For a time they will go on merrily enough, and send

things booming, but in the end most of them get the worst of it. At the

risk of repeating myself, I will say here:

Mr. A. B. Stockwell is a good illustration of the truth of this. At one

time he was worth many millions of dollars. His start in life was as a

purser on a Lake Erie steamboat; his father, it is said, kept a livery

stable in Cleveland. On one of his trips Stockwell was in a position to

show considerable attention to Elias Howe, the inventor of the eye at

the top end of the sewing-machine needle. Mr. Howe was accompanied by

his daughter. Stockwell made himself agreeable to Miss Howe also, and

with such good effect that he managed to win her affections, and soon

thereafter married her.

When Mr. Howe died, Mrs. Stockwell came into possession of her father’s

millions. With this nest egg Stockwell started in Wall Street, and

before anyone realized what had happened he was the most talked-of man

in the district. He put all his wife’s millions in Pacific Mail stock,

secured entire control of the company and elected himself its president.

He came into the Street as plain Stockwell. Then, as the news of his

liberality and good-fellowship spread, he became Mr. Stockwell. After he

got hold of the Pacific Mail he was Commodore Stockwell by common

consent. Everybody bowed and scraped to him, and no man was so high and

mighty that he was not proud to shake his hand.

Stockwell took hold of Pacific Mail at about 40 and sent it up to 107.

It was at this period that he was worth on paper over $15,000,000. But

he found, unfortunately, when it was too late to retreat, that though

Pacific Mail was up to 107 it was not worth that figure when the

unloading commenced.

He was landed high and dry with it all, and the Street told him he was

welcome to it. He tried to sell, and found that there was no market.

Then came violent demands on him to pay up his numerous call loans, and

in order to respond he had to sell regardless of price, and thus a

whirlpool was created which finally sent the stock down to the price at

which he had begun his original purchases. In this one upset he lost all

his paper profits and his wife’s millions besides. That was the most

famous boom in the history of Pacific Mail, notwithstanding Leonard

Jerome’s previous brilliant ups and downs in that property.

Leonard Jerome and his brother Addison had a good time with Pacific Mail

for a while. They ran it up to high figures several times, but finally

met with the same experience that Stockwell did. The two Jeromes, from

being among the wealthiest and most dazzling operators in the Street,

were in the end practically wiped out. Leonard Jerome, who was the

father of Lady Randolph Churchill, had nothing left to bequeath his

daughter except an equity in the house now occupied by the Manhattan

Club on Madison Avenue, which yields an income of about $15,000 a year,

of which Lady Churchill gets $10,000.

These are a few of the booms that have stirred up things in Wall Street

at one time or another, as did the Keene, the Gould, and the Vanderbilt

booms, and the rest I have mentioned.

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